Sempra Plan Would Bring State Bolivian Gas Via Baja

Energy-starved California one day may be served by plentiful Bolivian natural gas delivered through a massive Baja California gas terminal project under a preliminary agreement announced Tuesday by Sempra Energy of San Diego.

The deal to deliver up to 800 million cubic feet of liquefied natural gas a day raised the stakes in the race to build the West Coast’s first LNG terminal and pipeline. Mexico, like its neighbors in California, is facing a gas deficit in coming years.

Sempra said a consortium led by Spanish energy giant Repsol, BP and British Gas of Britain and Bridas of Argentina signed a memorandum of understanding to enter into exclusive negotiations to supply gas to Sempra’s LNG terminal in Baja, targeting a 2005 completion.

Bolivian President Jorge Quiroga was present at the signing of the memorandum Tuesday in Washington.

In October, Sempra and partner CMS Energy of Dearborn, Mich., unveiled their plan to build a $400-million terminal in Baja that would receive boatloads of supercooled liquid gas, regasify it, then pipe it to other destinations in Mexico and to California.

Sempra and CMS have acquired a site 60 miles south of the U.S.-Mexico border but as yet have no permit from the Mexican government. Environmentalists and nearby residents, many of whom are Americans, say they plan to oppose the project.

El Paso Corp., Royal Dutch/Shell, ChevronTexaco Corp. and Marathon Oil Co. have expressed interest in building similar LNG projects in Baja. All would try to supply North America with the huge surpluses of gas available in Pacific Rim countries including Bolivia and Australia.

The Sempra project faces many hurdles, said Darcel Hulse, senior vice president. The consortium of suppliers does not have permission from Chile or Peru to build a gas liquefaction terminal or to build a pipeline from Bolivia, he said.

A crucial U.S. piece also is missing. Sempra lacks federal approval for the U.S. leg of a 215-mile Baja Norte gas pipeline stretching from southwest Arizona to Tijuana. Some Imperial Valley residents oppose it because the power plants in Mexicali that it would feed could boost cross-border pollution.

Sempra’s pipeline is essential for shipping the regasified LNG from Baja northward to the U.S. pipeline grid. Hulse said he is confident the pipeline will be completed by September, despite opposition.

The first Baja LNG project to open would enjoy a significant market advantage. Houston-based El Paso Corp. owns a 100-acre plot in Rosarito and is in the planning process, racing Sempra to be first.

Hulse said an agreement with the Repsol-led group, which is not final, would give Sempra a competitive advantage in transportation costs. Shipments from Bolivia involve a trip of about 4,200 miles--half the distance to Baja from Australia, the proposed source of El Paso’s gas.

Mexico, which has never had an LNG plant, is just now completing the application framework.

Despite the drop in gas prices over much of this year, Michelle Michot Foss, director of the University of Houston Energy Institute, said the various proposed LNG terminals in Baja, as well as projects on the Gulf Coast, would fill a supply gap in Mexico.

“Mexico doesn’t have the capital, organization, skills or political will to drill for gas on its own reserves,” she said.